Bank of Canada continues to hold its key policy rate at 4.5% today

With the unemployment rate at 5% and inflation at 5.2%, the Bank of Canada held the overnight rate at 4.5%. Most Canadian economists believe the key interest rate will be held at 4.5% for the duration of 2023 even though the central bank left the door open to more tightening. The next official inflation announcement is scheduled for April 18th, 2023.

“The Bank of Canada’s room to maneuver is being curtailed by the current macroeconomic situation”, Randall Bartlett, Senior Director of Canadian Economics noted “deteriorating financial market conditions on the back of a series of banking system issues in the US and Europe suggests risks to financial stability are a material concern. This reinforces the Bank’s current holding pattern.”

Looking ahead:

The Bank of Canada would be poised to reduce overnight rates to spur the general economy likely in 2024, and this will have a dramatic effect on real estate market activity due to pent-up buyer demand, falling interest rates, massive immigration in Canada increasing demand for housing, and a severe undersupply of housing stock. Canada’s population grew by just over 1 million people in 2022, bringing the country’s total estimated population to 40 million. This will add further pressure on housing supply and drive up rents in the rental market.

The next Bank of Canada announcement is June 7, 2023.